12 Key Facts About Classic Car Coverage

Classic car owners are passionate about their vehicles, keeping them as showroom pieces in their homes or driving them around to catch people’s eyes. Whether kept indoors or occasionally driven, however, these vehicles need to be insured against everything from water damage to collisions.

While cheaper to insure than standard vehicles, classic cars has estimated annual premiums of up to $2 billion and is a great nice for independent agents and brokers to break into.

Here are 12 important facts about Classic Car coverage for both insureds and agents alike.

1) Coverage Is Cheap. The premiums for Classic & Collectible Car coverage are much cheaper than Standard Auto policies, with most insureds paying just 25-33 percent of what they would for a comparable policy on a daily-drive vehicle. For collectors with just a single classic car in the garage, worth in the mid-five figures, an average premium is likely to be in the $200-$400 per year range, depending on the liability requirements of the state where the insured resides.

2) Limited Use Expected. The reasons for the substantially lower rates are twofold. First and foremost is that usage of these cars is expected to be strictly limited to special occasions—they are not meant to be used for the daily commute or taking the kids to soccer practice. But in addition to usage restrictions, another factor helps keep premiums low: Insureds tend to take very good care of their cars, treating them more like a painting—or beloved family member—than a mode of transport.

3) Agreed Value Policies. Another key characteristic of collector-car coverage is that policies are Agreed Value, not Actual Cash Value. Markets that play in the space will have a range of valuations they will accept from clients based on the make and model of a car. Clients whose proposed valuations are much higher would need to have the car independently appraised.

“In many cases, we know more about the values and trends in pricing than the owners do, so we’ll work with them to ensure they get adequate coverage,” says McKeel Hagerty, CEO of Hagerty Insurance.

4) Indie Agents: Find Business at Car Shows. For independent agents and brokers looking to break into the Classic Car niche, one of the best bets is to attend a local event for enthusiasts of the hobby. Ron Fiamma, vice president/director of private collections for the Private Client Group division of Chartis, estimates there are 10,000 car shows every year—from the popular “Concours d’Elegance” in Pebble Beach, Calif., “to a handful of guys getting together in a McDonald’s parking lot. People are so passionate about their cars that it’s easy for a broker to stroll around and use an icebreaker like asking how someone got started collecting. With only a limited amount of knowledge, a broker can infiltrate this market pretty easily. You don’t have to be an expert.”

5) Racing Excluded (with One Exception). Some carriers allow collector cars to hit the track in very specific and controlled circumstances—basically for a leisurely spin around the circuit. But all carriers exclude actual racing—with one big exception. Six months ago, Chartis made available a new, nonadmitted, physical-damage endorsement “as an accommodation to top clients who race,” says Fiamma.

6) Common Claims. Many classic car claims stem from incidents that occurred on the insured’s own property. “Many claims have nothing to do with collisions, but are related to storage issues—something falls in the garage or there’s flooding or rodents or a hazard from construction going on next door,” says Hagerty. Engine fires are another frequent source of insurer payouts, as well as water-damage and flying rocks when a car is being transported.

7) “Rat Rod” Submissions. Rising. One widely seen trend is an increase in insurance submissions for “rat rods,” heavily modified vehicles that harken back to the designs of 1950s hot rods. The insurance challenge: finding an accurate value. The pros: clients often fix the cars themselves.

8) Billion-Dollar Market. Just how big is the Classic & Collectible Car niche? No one is quite sure, with estimates of annual premium ranging from $500 million to $2 billion—although the majority of industry experts feel $1 billion is a pretty accurate estimate.

9) Good Investments. While an unabashed love of classic cars is what really drives collectors to spend millions or even tens of millions on the hobby, the purchases often prove to be good investments as well. Indeed, given the low returns on more traditional investment plays, some underwriters report collector cars are becoming even more popular these days as buyers view them as a way to park money in a relatively safe investment—while also getting a lot more enjoyment than what a stock or bond provides.

10) PURE Opinion: An Argument for Combining Regular, Classic Cars. It is highly recommended for high-net-worth clients to combine both classic cars and regular-use vehicles on one policy, according to Martin Harlet, COO of Privilege Underwriters Reciprocal Exchange (PURE), a specialty insurance company that provides customized insurance to high-net-worth individuals. "By insuring classic cars as part of a personal-lines account that includes regular-use vehicles on the same policy, the insurer has a clearer picture of vehicle usage, resulting in broader coverage for the insured. Other advantages include the efficiency of maintaining one agent, carrier, policy and bill for all cars as well as savings, including the potential benefits to your regular-use automobiles through multi-car pricing."

11) Giant Auto Insurers Play in This Space, Too. Auto-insurance giants are also playing in the classic car space. Among them is State Farm, whose Antique policies are for vehicles at least 25 years old, and its Classic policies are for cars at least 10 years old and produced on a limited basis. Physical damage is on a stated-value basis and usage is restricted to exhibitions and parades, resulting in low liability premiums.

12) Repairs Can Trump Replacements. Often times, repairing a damaged classic car can cost less than replacing it. A Chartis client drove his Ferrari Enzo—one of 400 made—into a wall, deeming it a total loss. But the client refused payment, requesting he wanted the car back. Chartis paid to send the car to the Ferrari factory in Italy for repairs, and flew the client to Italy twice to oversee the work and test the repaired vehicle on Ferrari’s track. Writing a total-loss check would have cost Chartis two-thirds as much.

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